The molecular basis has been determined for differences in the infectivity and XC phenotype of the endogenous ecotropic murine leukemia virus (MuLV) of the low leukemia mouse strain, C3H/He; its relative in the high leukemia mouse strain AKR; and highly infectious, XC-positive C3H virus variants selected in vitro. Endogenous ecotropic type C virus induced by iododeoxyuridine from the nontransformed C3H/10T1/2 cell line is XC negative and replication deficient. In contrast, viruses produced late after iododeoxyuridine induction in chemically transformed C3H/10T1/2 cells (MCA5) are XC positive and infectious. XC-negative viruses can be converted to XC-positive viruses upon growth in certain transformed cell lines. We have cloned the endogenous ecotropic provirus of C3H/He from MCA5 cells, which is XC negative and replication deficient, as well as two XC-positive C3H proviruses derived by in vitro conversion. Nucleotide sequencing established that the XC-negative C3H p110 was integrated within the R region of an endogenous VL30 long terminal repeat in reverse orientation, and differed from the infectious AKR p623 provirus by a point mutation substituting Lys for Arg at the potential precursor cleavage site for gp70 and p15E. The in vitro-converted XC-positive C3H proviral clones, C1 3211 and 4211, have Arg at this site and the normal cleavage site is thus regenerated in these clones. We have altered the Lys residue to Arg at the proteolytic cleavage site of p110 by site-directed mutagenesis and we have reconstructed the provirus. DNA from this construct, upon transfection, gave rise to XC-positive, replication-competent provirus. Thus, we have established that a single point mutation at the processing site of the envelope precursor protein, gp85, is responsible for the difference in the infectivity and XC phenotype of endogenous ecotropic MuLV from C3H/He and AKR mice, and that the basis for in vitro conversion is a mutation at this site.